Like individual consumers, businesses and organisation of all kinds, banks need their own mechanism to transfer funds and settle inter-bank transaction-such as borrowing from and lending to other banks-and customer transactions. As the banker to banks, the Reserve Bank fulfills this role.


Banks are required to maintain a portion of their demand and time liabilities as cash reserves with the Reserve Bank. For this purpose, they need to maintain accounts with the Reserve Bank. They also need to keep accounts with the Reserve Bank for settling inter-bank obligations, such as, clearing transactions of individual bank customers who have their accounts with different banks or clearing money market transactions between two banks, buying and selling securities and foreign currencies.

In order to facilitate a smooth inter-bank transfer of funds, or to make payments and to receive funds on their behalf, banks need a common banker. By providing the facility of opening accounts for banks, the Reserve Bank becomes this common banker, known as ‘Banker to Banks’ function. The function is performed through the Deposit Accounts Department (DAD) at the Reserve Bank’s Regional offices. The Department of Government and Bank Accounts oversees this function and formulates policy and issues operational instructions to DAD.

Reserve Bank as Banker to Banks

Lender of Last Resort

Few initiatives

As Banker to Banks, the Reserve Bank focusses on:

  • Enabling smooth, swift and seamless clearing and settlement of inter-bank
  • Providing an efficient means of funds transfer for banks
  • Enabling banks to maintain their accounts with the Reserve Bank forstatutory reserve requirements and maintenance of transaction balances
  • Acting as a lender of last resort